There, we said it! The question everyone always has but seldom asks in public--what's in it for me?--is now out in the open, so we can talk about it more freely. We can finally begin to have some much-needed, intelligent conversation and debate about airline merchandising, without hiding behind fear, apprehension, or lack of understanding. We can begin to address questions such as these: What is it, really? In what shape and form will this new industry beast show itself? What are the technological, commercial, and adoption implications? Why is it so scary? And yes, we can even address the big question: What's in it for me?
Over the next few weeks, I will attempt to construct a few reasonably coherent discussion points that address airline merchandising and the impact this soon-to-be-unleashed phenomenon will have on our industry. In this first installment, we'll attempt to collectively "face our fears" by asking why are we so anxious about airline merchandising?
Before we go any further, let's define merchandising. Our friends at Wikipedia can help here. What does Wiki say about merchandising? Merchandising means "maximizing sales using product design, selection, packaging, pricing, and display that stimulates consumers to spend more. This includes disciplines in pricing and discounting, physical presentation of products and displays, and the decisions about which products should be presented to which customers at what time." Wiki goes on to say, "In the supply chain, merchandising is the practice of making products in retail outlets available to consumers."
Put more simply, we could define merchandising as the process of influencing people to buy, with a focus on improving customer service and generating new revenues.
That really doesn't sound so scary, does it? Actually, from a consumer point of view, it sounds pretty good, and pretty familiar. This is because merchandising is "buy" no means a new concept. As consumers, we engage and react to it everyday--whether we're shopping for electronics, food, vacations, cars, or something as simple as a cup of coffee. As individuals, we like the opportunity to have choice and control over what we are buying, and pay more when we sense we are receiving more value. And face it, the reason merchandising works so well in so many market segments is because it creates a truly symbiotic and positive relationship between consumers and suppliers--the crux of which is choice, control, and more "personalized" value propositions ... a true win-win.
In fact, looking at the success of merchandising throughout our society and economy, it would seem an inevitable no-brainer that the travel industry deserves its part of the win-win too. And certainly, airlines have woken up to this. Merchandising has been publicly hailed by airline executives as the Holy Grail and the silver-lining opportunity--everything from the Billion Dollar Baby to "Hey, we finally found our path to profitability and our competitive advantage!" With top U.S. airlines earning over $2 billion in merchandising revenue in just the fourth quarter of 2009 alone, their enthusiasm is well understood.
But what about the rest of the travel industry? Well, here's where the enthusiasm is simply missing in action. In seemingly every webinar, presentation or group discussion with TMCs and corporate travel managers, there is not a single hand in the crowd when asked, "How many of you are looking forward to airline merchandising?" There seems to be limited interest, much anxiety, and, frankly, quite a bit of animosity toward the concept.
So we just have to ask ourselves: How can something that is seemingly so good for the airlines be so scary for the rest of us? Well, I would argue the main reason is because it's new, and outside the mainstream. Merchandising requires all sorts of new things--new behaviors, technologies, distribution opportunities, communication vehicles, and economic models. Most of us don't fully understand how this will work yet. And, as we all know, our industry isn't always eager to adopt new things and adventure into new uncharted territory where there will be the inevitable bumps in the road. Hence the apprehension, fear, anxiety, and misunderstanding.
My goal with this series is to demystify many of the issues around merchandising, ranging from basics like "what is an unbundled fare, anyway?" to larger issues about how this movement stands to change how we do business as a supply chain, and the underlying business models. We will explore the premise that merchandising represents a tremendous upside opportunity for travel agencies and the airlines in terms of new customer acquisition, customer retention, improved levels of customer service, and new revenue generation. We'll tackle questions around merchandising and corporate travel, including the opportunity for corporations and corporate travelers to benefit through from real choices based upon convenience, value, and company policy--if merchandising is implemented smartly.
In the next installment, we'll test the readers' knowledge of new merchandising terms that have popped up in our industry dialog--things that all of us need to understand, regardless of our place in the supply chain or our views on merchandising. Remember, the goal is more understanding and less anxiety!
To help keep this an open dialog, I encourage your comments, suggestions, and of course plenty of debate!